ITC Ltd Sees Heavy Call Option Activity Amid Bearish Technicals and Sell Rating

Heavy Call Option Trading Highlights Bullish Positioning

On 3 February 2026, ITC Ltd. emerged as the most active stock in call options, with 6,006 contracts traded at the ₹320 strike price expiring on 24 February 2026. This activity generated a turnover of approximately ₹5.15 crores (₹515.07 lakhs) and an open interest of 8,163 contracts, indicating sustained interest from option traders. The underlying stock price stood at ₹313.45, just 3.56% above its 52-week low of ₹302, suggesting that traders are positioning for a potential rebound above the ₹320 level within the next three weeks.

The concentration of call options at this strike price, which is slightly above the current market price, reflects a cautiously optimistic outlook among market participants. Such positioning often implies expectations of a moderate upside or a hedge against short-term volatility. However, this optimism contrasts with the stock’s recent technical weakness and fundamental challenges.

Technical and Fundamental Backdrop Remains Challenging

ITC Ltd.’s share price has been under pressure, trading below all key moving averages — 5-day, 20-day, 50-day, 100-day, and 200-day — signalling a persistent downtrend. The stock’s 1-day return on 2 February 2026 was -0.44%, closely mirroring the FMCG sector’s decline of -0.56%, while the broader Sensex surged 2.56%, highlighting ITC’s relative underperformance.

Investor participation has also waned, with delivery volumes falling by 4.14% against the 5-day average, registering 1.94 crore shares on 2 February. Despite this, liquidity remains adequate, with the stock’s traded value supporting a trade size of approximately ₹21.05 crores based on 2% of the 5-day average traded value. This liquidity ensures that option and stock trades can be executed without significant price impact.

Mojo Score Downgrade Reflects Deteriorating Fundamentals

Adding to the cautious sentiment, ITC Ltd.’s mojo score was downgraded from Hold to Sell on 29 December 2025, with a current score of 48.0. The downgrade reflects concerns over the company’s growth prospects and valuation metrics. The market cap grade remains at 1, underscoring its status as a large-cap stock with a market capitalisation of ₹3,92,540.76 crores.

The downgrade signals that despite ITC’s dominant position in the FMCG sector, investors and analysts are increasingly wary of its near-term earnings momentum and competitive pressures. This fundamental backdrop tempers the bullish undertones suggested by the call option activity.

Expiry Patterns and Market Sentiment

The expiry date of 24 February 2026 is less than three weeks away, a period during which option traders often adjust their positions based on evolving market conditions. The high open interest at the ₹320 strike price suggests that many traders are either speculating on a price rise above this level or using these calls as a hedge against existing short positions.

Given ITC’s current price of ₹313.45, the ₹320 strike represents a modest premium of approximately 2.1%. This proximity indicates that traders are not expecting a dramatic rally but are positioning for a gradual recovery or a short-term bounce. The sizeable open interest also raises the possibility of a short squeeze if the stock price moves decisively above ₹320, potentially triggering further call option buying and stock accumulation.

Sector and Market Context

ITC’s performance must be viewed in the context of the broader FMCG sector and the overall market. While the Sensex has shown robust gains recently, ITC’s sector peers have also faced headwinds, with the FMCG sector down 0.56% on 2 February. This sector-wide weakness reflects concerns over inflationary pressures, input cost inflation, and changing consumer spending patterns.

ITC’s underperformance relative to the Sensex and its trading below all major moving averages suggest that the stock is currently out of favour with investors. However, the active call option interest indicates that some market participants are anticipating a turnaround or are positioning for volatility ahead of the expiry.

Investor Takeaway: Balancing Bullish Options with Bearish Fundamentals

For investors, the current scenario presents a nuanced picture. The heavy call option activity at the ₹320 strike price suggests that some traders are betting on a near-term recovery or volatility-driven gains. However, the fundamental downgrade to a Sell mojo grade and the stock’s technical weakness caution against overly optimistic expectations.

Investors should weigh the potential for a short-term bounce against the broader challenges facing ITC, including sector headwinds and valuation concerns. The stock’s liquidity and large market capitalisation provide some comfort for institutional investors, but the falling delivery volumes and underperformance relative to the Sensex highlight the need for careful risk management.

In summary, while the call option market signals a degree of bullish positioning, the underlying fundamentals and technical indicators suggest that ITC Ltd. remains under pressure. Investors should monitor price action around the ₹320 level closely, as a decisive move above this strike could trigger further momentum, whereas failure to breach this level may reinforce the current downtrend.

Outlook and Strategic Considerations

Looking ahead, ITC’s performance will likely hinge on its ability to navigate inflationary pressures, sustain volume growth in its FMCG portfolio, and improve margins. The mojo downgrade underscores the need for operational improvements and strategic clarity to regain investor confidence.

Option traders appear to be positioning for a potential recovery, but the risk-reward balance remains delicate. Investors with a bullish outlook might consider the call options as a leveraged way to participate in any upside, while more cautious investors may prefer to await clearer signs of fundamental improvement before increasing exposure.

Overall, ITC Ltd.’s current market dynamics exemplify the complex interplay between derivatives market sentiment and underlying stock fundamentals, offering valuable insights for discerning investors.

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